Direct Selling Exec: Herbalife Should Do ‘Remarkably Well’ Tomorrow

By Brendan Conway

Embattled Herbalife’s (HLF) stock got a shot in the arm today with hedge-fund manager Daniel S. Loeb’sbuy of an eight-percent stake in the company. Tomorrow, at a much-anticipated investor day, Herbalife has a chance to instill enough confidence to get its share price back where it was before Pershing Square Capital Management’s Bill Ackman gave it the ax.

This afternoon, Herbalife’s troops sound like they’re revved up for the occasion.

Joseph N. Mariano, president of the Direct Selling Association, tells Barrons.com by phone that he’s confident the company will get investors back on its side. The association’s 200 members include Herbalife as well as Avon Product (AVP) and Herbalife peers Nu Skin (NUS) and Usana (USNA). (There’s also a Warren Buffett connection — member company Pampered Chef is a subsidiary of Berkshire Hathaway (BRKA, BRKB).)

“I think they’ll do remarkably well,” says Mariano, who says that direct-selling companies can be “particularly vulnerable” to shorts. “The facts can be laid out pretty clearly who buys the product, why they buy the product … [and when] the buyer and the seller are one in the same — what are the reason,” he adds.

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CEO of Herbalife Michael O. Johnson.

Mariano is bristling against “misinformation” in the marketplace, which in this case included what the direct-selling executive says was an effort to “create the very questions that [the shorts] suggest existed … a self-fullfilling prophecy.”

My own two cents: Investors who like Herbalife at these levels and think Ackman has the wrong end of this situation don’t risk much by waiting until tomorrow afternoon to buy. I could be proven wrong if a big slate of buybacks or, an even bigger bang, the company does something dramatic, such as announcing a Dutch auction. Barring those items, the analyst day could become one of those all-too-familiar “sell the news” events.

It’s been quite a rise off the bottom. Buying early on Thursday risks a bet that Herbalife can immediately convince yet more people that it will show Ackman’s claims to be false — to prove a negative. But as any student logic knows, it’s much easier to make a factual claim (or an accusation) than it is to demonstrate falsity.

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There are 3 comments

JANUARY 9, 2013 4:31 P.M.

citetez wrote:

Have to wonder about CNBC's onslaught against HLF

JANUARY 9, 2013 5:48 P.M.

noquiche wrote:

I agree totally...it is most interesting that they are doing a piece the day before the presentation. Mr. Greenberg is definitely no showing a balanced view of this situation and seems to want to talk over anyone that disagrees with Ackman.

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Chris Dieterich has covered the U.S. stock market for The Wall Street Journal and Dow Jones Newswires. He is a graduate of Regis University and the Missouri School of Journalism.